Thursday, June 07, 2012

We're often asked how much of a garden office (if any) is tax deductible. While we've covered this issue before on the site and indeed in the Shedworking book before, opinions vary and so we strongly recommend you talk to your accountant or tax expert. In the meantime, there's an interesting page of opinions on the subject at accountingweb.co.uk. Here's the question that sets the experts going:

"My client has just completed the building of a 'posh shed' in his garden. A pre fabricated type shed to be used as an office, no planning required. He has just passed me a pile of receipts relating to the purchase and construction with the expectation that they are tax deductible. He has 2 businesses, one flat rate and another standard vat.
I have a strong inclination that they are not tax deductible and if they were put through the business (capitalised), then capital gains tax would kick in when he sold his property (the office is in his garden). Is this correct?
Does anyone know if any expenses can be put through the businesses and if any VAT can be claimed back? I think claiming back the VAT on buildings relates to residential...not sure if an office is classed as residential?
Basically I don't know much but I am sure one of you out there has come across this before.There seems to be a trend these days for these posh offices...quite fancy one myself!"

2 comments:

The capital gains wouldn't be huge, so probably worth putting the office through the books. Also, you could treat it as an asset and depreciate it over a few years?

NB Any garden building used as an office to run a business technically needs planning permission,l even if it meets all permitted development criteria such as under 2.5m.The permitted development rules relate to incidental use e.g. sheds, chicken huts, summer houses. Using a garden office for working every day is not incidental and hence needs planning permission regardless of shape, size or position.

I'm curious to the interpretation of the definition of the permitted development rights on the previous post.

Is there case law that applies to the definition of incidental in this case.

Otherwise I cannot see why the incidental definition would not apply to the shed.

My understanding has always been that what the legislation is seeking to avoid is this being established as a separate dwelling or office, so should not have an independent entrance / sanitary facilities etc.

In terms of the definition of whether planning permission for change of use is required, the advice on the planning portal is fairly generous in its allowance without change of use.